tv Nightly Business Report PBS January 19, 2011 7:00pm-7:30pm PST
>> tom: pomp and circumstance, and lots of deals. president obama meets with china's president hu announcing billions of dollars in trade. >> at a time when some doubt the benefits of cooperation between the united states and china, this visit is also a chance to demonstrate a simple truth. we have an enormous stake in each other's success. >> susie: included in those deals? china's aggressive push into the aviation industry. you're watching "nightly business report" for wednesday, january 19. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captiong sponsored by wpbt >> tom: good evening and thanks for joining us. push and pull in washington tonight, as president obama hosts chinese president hu jintao on his official state visit. while obama called on china to respect human rights, susie. he also welcomed that nation's rise as a global economic power. >> susie: tom, the prickly issue of china's currency also came up. president obama said he believes it's still undervalued, and that he'd like to see a faster appreciation of the yuan. president hu said his country is
committed to letting market forces determine the value of the yuan. >> tom: hu also vowed today to give u.s. companies "equal treatment" in china, something president obama said is key to our mutual futures. >> with china's growing middle class, i believe that over the coming years, we can more than double our exports to china and create more jobs here in the united states. and i'm sure that chinese business leaders see enormous opportunities here as well. >> tom: presidents obama and hu used today's meeting to announce $45 billion worth of trade deals. from high-speed rail projects to new airplanes, the projects involve big u.s. manufacturers: boeing, honeywell, caterpillar and general electric. g.e. inked several deals with the chinese, including one to make electrical systems for commercial aircraft. china is working aggressively to develop its own aviation industry, and as darren gersh reports, deals like the one with g.e. are critical for the asian
nation's global ambitions. >> reporter: this model represents one of the toughest business challenges in the world today. the chinese market for jetliners is so large, u.s. companies can't afford to stay out. but the chinese government has developed a decades-long plan to compete with u.s. companies for global leadership of aviation. china analyst nicholas lardy says that's both an opportunity and a threat for aviation suppliers like g.e. >> the calculation of these companies is that, yes, china may be able to replicate this technology, eventually produce its own airplane engines, its own avionics. but by the time they're able to master these technologies, the frontier will have moved on. >> reporter: by the middle of this decade, china hopes to turn the c919 regional jet into a viable airplane. but to get there, it needs foreign companies to provide chinese firms with engine and software technology. in public, u.s. and european c.e.o.s are signing high-profile deals to bring that technology to chinese joint ventures.
but in reality, aviation analyst richard aboulafia says, u.s. and european suppliers are doing everything they can to protect their most important secrets. >> the real problem with working with china on aerospace is that you know that you have no intellectual property rights. which means, of course, that you tend to show up with stuff that's maybe 95% of the best, but not quite. >> reporter: aboulafia says early versions of the c919 will be too heavy and burn too much fuel to be competitive internationally. but chinese officials told u.s. industry leaders at a recent dinner they are prepared to spend billions of dollars to succeed in aviation. the good news for foreign competitors, says aboulafia, is that china's aviation industry is heavily state controlled. >> you look at china and they've got tremendous resources, a fantastic market, a lot of talent. they should be one of the biggest aerospace industry powers in the world. but because of the government-
directed path they're taking, they are proceeding in an extremely uncompetitive and nonthreatening way. >> reporter: but china's ambitions are not just economic. success in global aviation is considered an issue of national pride. yesterday, chinese president hu jintao flew into washington on an american-made boeing 747. a few decades from now, china is determined that a future president will walk off a jumbo jet that was designed, produced and assembled in china. darren gersh, "nightly business report," washington. >> susie: here are the stories in tonight's n.b.r. newswheel: disappointing earnings pressured stocks. the dow fell 12 points, the nasdaq lost 40 and the s&p 500 was off 13. trading volume pulled back slightly on the big board, but was still above a billion shares. it rose on the nasdaq to 2.2 billion. builders broke ground on fewer new homes last month. housing starts were off 4.3% to 529,000-- the lowest in over a
year. another guilty plea in the largest insider trading case ever, galleon group. former hedge fund consultant danielle chiesi admitted to three counts of insider trading. this is the 16th guilty plea. but she won't cooperate in the case against galleon founder raj rajaratnam. late today, house republicans voted to clear the way for a repeal of president obama's health care reform law. but it's doubtful the measure will get any traction in the democratically controlled senate. >> tom: still ahead, "street critique" guest hilary kramer on goldman sachs' latest earnings. she's editor of gamechangerstocks.com. >> susie: when investors look for safe investments, municipal bonds are on the list. but these days, some experts warn that munis are risky, now that many states and cities are in bad financial shape. investors have been fleeing municipal bonds, pushing yields
to levels not seen in years. so are the concerns legitimate? and what should investors in muni bonds do to protect themselves? erika miller got two very different opinions. >> reporter: the problem is easy to understand: spending more than you make, and not being able to make payments on the debt. whether you're a consumer, or a city, the consequences can be serious. analyst walter zimmermann advises against owning municipal bonds now. >> the core essential problem with the municipal bond market is the engine that drives deflation. and that engine is too much debt and not enough revenue to support that debt. >> reporter: he is not the only one concerned. investors have yanked about $25 billion out of municipal bond mutual funds since november. that's about twice the amount of money that went into those funds last year. zimmermann thinks trouble in the municipal bond market will get worse once stock market investors realize the economy is
not recovering quickly. >> it's our view that the stock market is about to peak, and as the stock market peaks out, and declines, then we think the concerns over the municipal bond problem will further balloon." >> reporter: he advises investors to put their money in short term treasuries and wait-- at least the principal will be safe. but financial planner eric hu believe the fears of widespread muni bond defaults are overblown. >> i feel interest rates are at a low. i feel with the general obligation bonds-- the g.o. bonds-- the housing defaults are possibly at an all time high. and hopefully, we're going upwards from here. >> reporter: hu recommends munis for wealthy investors who want to lower their tax bills. the key, he says, is sticking with shorter-term maturities. he only recommends top quality, aaa-rated bonds-- preferably ones that are insured.
>> in the case of g.o. bonds, you need to know the town. you need to know the default rates and the general lay of real estate in that area. with revenue bonds, you need to know the revenue source. you need to know how they do business and how the revenue stream comes in. and that should be the first factor in these trying times. >> reporter: so what would it take to convince muni bond bears that the waters are safe? they want to see a dramatic and sustained economic recovery with rising home prices and falling unemployment. erika miller, "nightly business report," new york.
>> susie: once again earnings were the watch word on wall street, whether it was the number that came out before the bell or reports coming out after the bell, a lot to talk about on the earnings front. >> tom: absolutely. 24 hours ago we had block wus buster tech earnings from ibm and apple, but that didn't help out today's market activity, s you uzie. let's roll out tonight's market focus. >> tom: the major indices fell from their post-recession highs, with the materials and financial sectors leading the losers. let's begin with financial stocks. a handful of big banks turned in earnings, putting pressure on the sector. goldman sachs led the way. fourth quarter profits were a
little more than half what they were a year ago. investment banking and trading revenue fell. looking closer, goldman saw fixed-income, currency and commodity trading revenues plunge 48%. marketing making revenues were down 43%. market making is when goldman trades on behalf of its clients. principal transactions, or when goldman was trading its own money, those revenues were up 50% in the fourth quarter last year. goldman sachs stock shed almost 5%. volume was three times its normal pace. after the drop from its april high, down to the july low, shares have been trending higher since july. tonight it is at a one-month low. wells fargo stock also was hit by selling, losing 2%. it also saw a pop in volume. last week, it was making a run after its springtime highs. wasn't able to make it. earnings came in as expected. its mortgage business was up,
but new banking rules limiting fees cut into revenues. still, profits and revenue hit new records thanks to the wachovia purchase. as that integration nears an end, the bank says expect job cuts. speaking of job cuts, american express will cut 550 jobs. that announced today. this drop of more than 2% in its share price came as its projected earnings just under estimates. those results are expected monday. a trio of other bank earnings. u.s. bancorp beat the street, but shares sank 3%. northern trust was hurt by low interest rates and disappointing results. the stock fell more than 5%. and state street beat estimates, still the stock was off 4%. one of the biggest financial losers was mortgage insurer m.g.i.c. investment. this is the biggest mortgage insurer for fannie mae and freddie mac. the good news? fewer delinquent loans. the bad news?
take a look here at the earnings. losing more money than anticipated in the fourth quarter. revenue saw a double-digit drop. that loss led to the stock losing a fifth of its value. 20.5% lower. this is a 30-session chart. shares had been climbing at the end of the year, expecting a better turnaround. didn't happen with the fourth quarter. it wasn't alone in the sell-off. fellow mortgage insurers p.m.i. group and radian dropping at least 15% each. genworth lost 5%. after the close, ebay announced better-than-forecast results, and its outlook was ahead of estimates. now that was some good news as ebay has struggled to turn its online auction business around. shares popped in october in anticipation of a strong fourth quarter. coming into the numbers, shares were down 1% but bounced up 3% after the close. speaking of outlooks, it was a weak outlook from semiconductor maker cree. shares shed 14.5%.
take a look at this move lower today. since hitting a high of over $80 in april, they have seen a series of lows. remember, material stocks were weak, led by mosaic. its majority owner, cargill, will spin off the 64% of mosaic it owns, worth about $24 billion. cargill is a privately held company. word of the sale sent mosaic down more than 10%. mosaic has been rumored as a potential buyout candidate, but a few analysts don't think it will happen anytime soon. and that's tonight's "market focus."
>> tom: the peak weeks of earnings season haven't started yet, but so far tonight's "street critique" guest gives them an overall grade of "excellent." she's hilary kramer, editor at gamechangerstocks.com. nice to see you. so excellent earnings, what do you make so far about the outlooks, though? >> well, intel and ibm have tofld us that tech is doing extraordinarily well, and of course apple with their blowout earnings. and the guide ants are looking very strong, and i think we are going to see earnings continue to do well. i have my eye on general electric, that's an important proxy for me on the industrials, as well as cat to see how the emerging market, doing. >> tom: so you're waiting for some manufacturers and for the industrials. we have seen financials report and a couple of your previous picks included this week, goldman sax who detailed their earnings earlier, you've liked this stock since the fall of
2007, since then down about 20%. city group also reporting earnings this week, a little disappointing, the share prices since you first chose it in december, just a penny lower. do you still like these two putting your money to work orz on both of them, yes, because if you look at the fundamental earnings report it was on fixed income trading on the bond trading and on investment banking. always lumpy when it comes to the commercial banks and especially the securities firms, the brokers like the goldman sax this is an excellent buying opportunity. and just the sector is only down 20%, goldman sax since precredit crisis that shows you the resiliency and strength of this name. >> tom: did you feel the same way about city group after its earnings? >> yes, because i saw some real positive signs out of latin american asia there and we also saw credit quality improving. >> tom: you did bring a new pick american public education, this is an online university indicatering to military personnel. you see the big drop in share price back in august when it
warned of a drop in the growth registration of military men and women. did you that doesn't concern you. why would you put money to work thrz is the absolute best of breed of all the for property educational companies. this is an opportune time to get into a p. e. i., they don't have the same issues that some of the others do because the students are on g. i. bills or they are current military trying to get advanced degrees in order to get a higher rank. the company is expanding to the civilian population, and so the expansion opportunity is huge, and these are graduates that are turning out without a lot of debt on their backs. so it's a very different profile and a very honorable company. i followed it for a while and it really should be a core holding to be in the educational area in any portfolio. >> tom: we always invite our viewers to talk back us to, and tom sent us an e-mail, he wrote, apple, even without the recent health news about steve jobs, do you think the company is overvalued? you mentioned the strong
earnings that we heard this week. what do you think? >> there is so much opportunity there. a company with $60 billion of cash on their balance sheet. and when you see something like 70% increase in revenues, a company of this size, the opportunity there, the most important number is it's only, apple only has a 3% market share outside the u.s., that's the growth driver. >> tom: we also have a note from bill about dendrion, the company you mentioned in february of last year, shares up 22%. you recommended it, it's performed very well, do you still like the stock? how about it? >> i love dendreon, i own the company, they have to ramp up, they need approvals in europe. it's one to own and hold, but you always want to devirs file, take a look at shire and some others within the sector. >> tom: you can follow all those picks on our website. how about the disclosures of stocks mentioned tonight, ownership? >> yes, i own all of these companies. >> tom: you can follow her on
the blog. you can email us, email@example.com. or you can send us a note via twitter at my feed, @hudsonnbr, or nbr's feed. and facebook too. we'll feature some of your questions next wednesday our guest this evening, "street critique," it's hilary kramer with gamechangerstocks.com. >> susie: here's what we're watching for tomorrow: quarterly results for a.m.d., ford, google and morgan stanley. and, we'll talk food and rising prices with david delorenzo, president and c.e.o. of dole food. also tomorrow, one of the world's iconic skyscrapers goes green one window at a time. "planet forward" looks at the empire state building's new energy efficiency. u.s. gasoline prices have reached their highest levels in more than two years. the national average for a gallon of regular unleaded is now $3.10. according to a.a.a., that's 37 cents higher than this time last year. average pump prices in major cities range from $2.91 in denver to $3.38 in san
francisco. drivers here in new york pay about $3.19 a gallon. some analysts think gas prices in some cities will top $4 by this spring. >> tom: nokia has hung up on plans to release a new smartphone on at&t's u.s. network. the firms reportedly planned to launch the x7 phone in the next month. but according to the "wall street journal," nokia had a change of heart because of a lack of support from at&t on subsidies for the phone. in the u.s. market, phone companies typically subsidize a the cost of a smartphone to keep the price down, as long as customers commit to two-year contracts.
>> susie: you probably have a college savings plan, a career plan and a retirement plan. but most americans ignore what could be their most important plan: how to grow old with dignity and grace, in their own homes. in tonight's "money profiles" segment, benno schmidt shows how some costs of aging can be offset with good planning and fine tuning. >> reporter: marilyn bruno's been here before. >> it started with my mom, who was needy. mom was 92 when my dad died.
and she basically just tuned out. >> reporter: putting her life on hold to care for an elderly loved one willingly, happily, lovingly. >> for my peace of mind, i had to keep an eye on everything. and i don't regret it at all. you can't pay someone to love your parent and treat them kindly. >> reporter: a nursing home or assisted living facility wasn't an option for bruno, not while her mom was still living. and the emotional costs for would have been much higher if you sent her away? >> believe me, much higher. she would be dead. she would have died right away. >> reporter: bruno moved from d.c., bought a south florida home customized with ease of use features and amenities for this, her second elderly care experience: caring for her 91- year-old aunt, irma micera. >> so far my mind is o.k. we'll see what happens. >> reporter: why is this better for you? >> well, it's family. it's family. >> reporter: family yes, but also emotionally and financially staggering. caring for a loved one for a long time can be a huge burden. so with an aging baby boomer population that will greatly
outnumber facilities, planning ahead is paramount. >> in two weeks, you can have a quarter of a million, half a million dollars of bills pile up that are not covered by your insurance. your co-pays could be gigantic. >> reporter: saying she doesn't want to be a burden to her family, bruno bought long-term- health insurance, an option for aging at home if researched thoroughly. but it's pricey, with premiums running into thousands of dollars a year. >> i bought long term care insurance when i was way younger and locked in a premium. >> reporter: all right, we know you may be thinking, "planning sounds great, but i don't have the time, money or lawyerly ability to fully research elderly care. where do i go for the right answers?" relax, it's not impossible. >> i call long term health insurance "stay at home" insurance. that is a better way to think
about it. >> laura marshall of care advisors senior bridge preaches insurance and working with experts to make sure you maximize policies. >> a lot of these policies go unused, so what happens? the insurance company ends up keeping all the money! >> reporter: it's not just long term care insurance you should learn about. there are private sites like goodcare.com with toolkits to crunch numbers and navigate the dizzying array of health care costs. goodcare doesn't sell insurance, its advice is aimed at helping, not hawking. and it's not alone. many of those organizations provide hotlines and toll-free numbers for non-computer users to call. get to know community-based organizations in your area. know medical histories, conditions and doctor's phone numbers and lifestyle habits. what do you like about gardening? >> it's just fun. you see things coming up. >> reporter: by planning ahead, irma micera remains at home, tending her garden. >> you water them, you make sure you fertilize them, and watch the little seeds grow. >> reporter: a well-orchestrated
end-of-life plan lets irma age with grace, surrounded by her things, her interests, and her loved ones on her terms. in miami, benno schmidt, "nightly business report." >> susan: such an important issue given that we're all going to be living so much longer, but we avoid it because it so complicated and kind of a touchy subject, right? >> tom: a very touchy subject, but if programs like this and reports like that one get the conversation going at the kitchen table, all the better. >> susan: a lot of resources out there to help us out. that's it for us tonight on "nightly business report". this is for wednesday, january 19. i'm susue gharib. thanks for watching. >> tom: i'm tom hudson, we hope to see you back here tomorrow night.